International Arbitration

International Arbitration

International trade has always been a major economic and political force in the development of nation states. When traders are successful and build enduring links between different peoples, this interdependence will usually be protected by some degree of political rapprochement. Balancing the various stresses and pressures within this system has been difficult as shifting political alliances reflect success or fear of competition or actual losses in trading accounts between states. Today, we have a more completely globalised economy, and the management of trade requires creativity and flexibility to bridge cultural differences in customs, practices and philosophies.

This bridge becomes more important when an international dispute arises. Experience shows that it is wise to adopt an international outlook when negotiating across national boundaries. Holding to entirely local standards can more quickly annoy the other parties whose natural reaction will be to insist that their standards are the ones to be adopted. Dispute resolution always requires some give and take, and recognising national sensitivities and the differences in customs and practices is the first step towards resolving any international dispute whether the procedure to be adopted is conciliation, arbitration or some other means. But one of the key problems is the often significant difference between legal systems.

The primary system for managing the Conflict of Laws is termed Private International Law. It exists to allow local courts to decide which of several competing systems should be applied to resolve any given dispute. Its importance lies in the fact that different legal outcomes would flow depending on which law is applied, i.e. a contract might be entirely valid under one system, partially valid under a second, and wholly unenforceable under a third. Needless to say, Private International Law is very unpopular with some judges who prefer always to apply their own law in their own court rooms. The very idea that a foreign law may be applied in a domestic case is considered a breach of state sovereignty. Yet, it is frequently absolutely necessary to apply the foreign system because otherwise the parties might find themselves in the ludicrous situation of having conflicting judgments in different countries. So, if A goes to State X and gets judgment under that law, and B goes to State Y and gets judgment under that law, which judgment should the parties obey? The better answer is that it should make no difference which court in which country hears the case. Only the “proper law”, i.e. the most appropriate law, should be applied. That this does not happen is the reason for the serious problem of forum shopping where the parties try to start their cases in the country most likely to give them a win.

This legal complexity has important commercial consequences as more and more transactions take place across national boundaries (and not only because of the internet). If the parties rightly fear becoming embroiled in a long-running legal dispute between legal systems, it is better to include terms in the agreement which select the courts to assume jurisdiction and the law(s) to be applied in the event of a dispute. Should even the notion of court cases be alarming, the parties may elect for arbitration which may be less time-consuming and arguments over choice of law may be resolved more amicably. International arbitration has achieved a high-profile status as an effective forum for resolving disputes and producing enforceable awards from neutral arbitrators.

Australian Arbitration has the experience and expertise to advise on international arbitration and to assist in the drafting of contract terms. We can produce agreements based on one of the international sets of rules for arbitration or tailor clauses to your specific business needs, advise on choice of venue, etc. In doing so, we reflect the cultural tensions that can creep into transnational business relationships and aim to provide a service that will compensate for different business (and ethical) cultures and allow all parties a fair way in which to protect their interests. One strategy may be not to select a proper law for arbitration purposes, leaving it to the arbitrators to make decisions on the merits. because neither side is being forced to accept an unfamiliar law during the pre-contract negotiations, a better atmosphere may be generated. However, in some cases, a failure to choose the proper law can lead to delays. It is therefore customary to prefer to select the law of the place of performance as the proper law because its public policies will be most affected by the implementation of the contract. With our expertise, we aim to minimise future problems if a dispute should arise.